We had "the talk" with our son when he started asking questions about sex (he was about 8). He was totally grossed out...so much so that he got really upset because he wanted children when he grew up but didn't want to do "that".
I wish I had a camera about 6 months later when he suddenly put the pieces together one day and figured out how he came to be, because the expression on his face was priceless! I'm sure he'll need therapy when he gets older.
Kids want to know...but don't really want to know...